Dollar in hold pattern ahead of details on Trump's tariffs

NEW YORK (Reuters) - The dollar was little changed on Wednesday against a basket of currencies as traders await details on U.S. President Donald Trump’s proposed tariffs on steel and aluminum, which have touched off fears of a global trade war.

FILE PHOTO: U.S. Dollar banknotes are seen in this photo illustration taken February 12, 2018. REUTERS/Jose Luis Gonzalez/Illustration

The White House said late Wednesday that Canada, Mexico and possibly other countries may be exempted from the tariffs on the basis of national security. The dollar pared gains in late U.S. trading following that news, while the Canadian dollar CAD= and Mexican peso MXN= trimmed their losses versus the greenback.

The dollar was weaker earlier in the day following the resignation of Trump’s top economic adviser, Gary Cohn, who was regarded as a bulwark of economic orthodoxy and had told Trump that markets would slump on a tariffs threat.

“So far the reaction has been muted,” Sireen Harajli, currency strategist at Mizuho in New York, said of the dollar. Cohn’s “resignation has signaled higher risk of a trade war.”

Cohn’s departure comes against the backdrop of steps by the Trump administration to assert protectionist policies, including withdrawing the United States from the Trans-Pacific Partnership, instigating a renegotiation of the North American Free Trade Agreement and imposing hefty import tariffs on some targeted products.

Nevertheless, doubts among traders have persisted about how broadly Trump would apply this protectionist move, if at all.

A White House official said Trump hopes to sign the tariffs on Thursday afternoon.

The index that tracks the dollar versus six currencies .DXY fell 0.042 points or 0.05 percent, to 89.576

The dollar’s bounce was stoked by data on domestic private hiring and labor costs that reinforced the view of underlying strength in the U.S. economy. However, those figures were mitigated by a larger-than-forecast widening of the U.S. trade deficit in January.

The Federal Reserve in its Beige Book of regional economic conditions suggested the U.S. expansion has continued with signs of wage growth accelerating since mid-January.

But anxiety about a deterioration in global trade limited the dollar rebound with some traders favoring the yen as a safe haven, analysts said.

“We therefore see the latest news as an additional reason to remain cautious on the outlook for the broad dollar,” Goldman Sachs economists Zach Pandl and Karen Reichgott wrote in a research note.

Against the yen, the dollar JPY= was down 0.06 percent, at 106.05 yen. It held just above a 14-month low of 105.23 yen set last week, Reuters data showed.

Ahead of an European Central Bank policy meeting on Thursday, the euro EUR= was last up 0.07 percent, at $1.2411

The trade-weighted euro index EUREER=ECF hit 100.2565, the highest level since September 2014.